2016 is the year of change in the LED industry.
At the beginning of the year, small and medium-sized manufacturers were not able to close the "LED winter", and international giants such as Osram and Philips adjusted their strategies and shut down the product line. The overcapacity was alleviated. Local LED companies such as Sanan Optoelectronics, Mulinsen, and Feile Audio want to expand their coverage and technical strength through overseas mergers and acquisitions. After the industry integration and production capacity clearing, the industry concentration has gradually improved and the pattern has gradually improved. In addition, the cost-end price increase and the mismatch between supply and demand have pushed the LED industry to ushered in four price hikes. The chip and package links are transmitted to the end products, corporate profits are rising, the industry is further returning to rationality, and the economy is picking up. Looking forward to 2017, especially in the development of emerging markets with high added value, small pitch, smart lighting, automotive LED, etc., we judge that the LED industry after the reorganization will have a better price trend under the influence of supply and demand.
Supply and demand differences, chip price increases are expected to heat up
In line with the order of industrial chain transmission, LED chip companies at the forefront of the industrial chain are mainly affected by raw materials, labor costs, and manufacturing costs; 45% of packaging costs come from upstream chips; downstream uses lighting as an example, 40% of costs come from packaging Link. It can be seen that these three links have a mutual transmission effect, and the cost of the front end will be passed on to the downstream. Generally speaking, the mismatch between supply and demand will directly affect the price, and the change of price will reverse the supply and demand. According to the LED industry chain forecast, we believe that the annual output of LED chips will reach 73.68 million pieces (2 inches) in 2017. On the one hand, there is a disconnect between the expansion of the mid-stream packaging plant and the downstream application demand. The internal chain of the supply end can no longer be connected, and there is a difference between supply and demand with downstream applications. With the increase in demand for smart lighting, small-pitch display technology and automotive LEDs, the main melody of LED lighting penetration is still there, and the demand for chips in 17 years is 87.15 million. We judge that the LED chip price increase is expected to be clear.
Target recommendation: focus on Sanan Optoelectronics
In line with the industrial chain, on the chip side, we are optimistic about the 29% market share of the industry leader Sanan Optoelectronics. Based on the judgment of industry supply and demand, the company is optimistic about the future price increase. Compared with peers, Sanan has the following advantages: First, unparalleled effective production capacity, second, LED chip technology level has reached international lead, and third, the upstream of the chip industry chain has been completed, helping the company to seize the rapid rise of chip prices to achieve rapid performance. increase. Moreover, the compound semiconductor business is expected to bear fruit this year and is expected to become the foundry king of the 5G chip field. In addition, we are focusing on Hongli Zhihui and Guoxing Optoelectronics on the test side; on the application side, we are optimistic about the small-pitch display on behalf of Zhou Ming Technology and Liard.
Production capacity clears, from shopping to returning to rationality
LED is called the fourth generation light source. It is a semiconductor device that can convert electrical energy into light energy. Its energy saving, environmental protection, safety, long life and low power consumption are favored. It is mainly used in general lighting, display and backlight. Source, decoration, automotive lighting and other fields. In addition to the downstream application areas, along the end products, the LED industry chain is divided into five major segments: substrate, epitaxial wafer, chip manufacturing, packaging and application. The chip produced by the mid-stream chip is transported to the downstream packaging factory and packaged into a single LED product to protect the chip. Therefore, for the number of LEDs required by the downstream application end, the matching degree between the chip and the package as the supply end and the downstream form the supply mechanism of the LED industry.
Since 2003, China's LED industry has developed rapidly, covering upstream and downstream industrial chains including epitaxy, chips, packaging, and application products. Especially in the dual drive of backlight and lighting, the industry growth rate in 2010 reached 45%. However, since 2014, the lighting industry has become a major pillar due to the saturation of the backlight market and the price decline. Since then, there has been a chaos in the industry, and the low-cost strategy has been used to achieve small profits but quick turnover, which has led to resistance growth in the industry. In 2016, the industry showed signs of recovery and the annual growth rate rose to 23%.
2016 is the year of change in the LED industry. At the beginning of the year, small and medium-sized manufacturers were not able to close the "LED winter", and international giants such as Osram and Philips adjusted their strategies and shut down the product line. The overcapacity was alleviated. Local LED companies such as Sanan Optoelectronics, Mulinsen, and Feile Audio have expanded their coverage and technical strength through overseas mergers and acquisitions. After the industry integration and production capacity clearing, the industry concentration has gradually improved and the pattern has gradually improved. In addition, the cost-end price increase and the mismatch between supply and demand have pushed the LED industry to ushered in four price hikes. The chip and package links are transmitted to the end products, corporate profits are rising, the industry is further returning to rationality, and the economy is picking up.
Under the adjustment in 2016, the LED industry structure, supply and demand structure, and price increase trend will undoubtedly become the focus of 2017. Looking forward to 2017, especially in the development of emerging markets with high added value, small pitch, smart lighting, automotive LED, etc., we judge that the LED industry after the reorganization will continue to increase its price under the influence of supply and demand. The pattern is improving.
LED chip pattern stabilizes and equipment capacity increases
The LED chip link refers to the application of electrodes to the epitaxial wafer for packaging and application. The LED epitaxial wafer refers to a specific single crystal film grown on the substrate substrate, which is the most technically demanding link in the entire industrial chain, directly affecting the final product quality and production cost.
At present, LED epitaxial wafer production was the bottleneck in the development of China's LED industry, mainly using Veeco and German Aixtron's MOCVD equipment for epitaxial growth.
In 2012, China's first self-developed MOCVD equipment was successful; during the “Twelfth Five-Year Plan†period, the state continued to strengthen its focus on the epitaxial wafer field and encouraged enterprises to expand upstream. At this point, the domestic LED epitaxial wafer technology has improved rapidly, and the products can reach the medium and high level. According to the data of Gaogong, if the MOCVD data is uniformly converted into the K465i model, the installed capacity of MOCVD machines in the world reached 3,130 units in 2015, of which China contributed 1473 units, accounting for 47% of production capacity. In addition to the scrapped equipment, in 2015 China's MOCVD possession was 1,220 units.
Despite the significant increase in the number of MOCVD equipment in China and the increasing localization rate, MOCVD equipment as a production equipment for LED epitaxial wafers has always been a key indicator for calculating LED chips. Therefore, calculating the number of MOCVD equipment according to the industry pattern and the expansion of the manufacturer is the main method for estimating the supply of LED chips.
Industry development and pattern
In 2015, China's LED chip production grew rapidly, achieving a 60% growth. However, the sharp increase in output is not optimistic. Under the chaotic image of weak demand in the European and American markets and low-cost competition in the industry, the price decline is also large. It is expected that the demand for LED chip industry will continue to increase this year. Chip companies are also holding high price hikes in price wars. The price decline trend has slowed down slightly, and the chip industry will accelerate integration.
In the field of upstream LED chips, local chip manufacturers such as Sanan Optoelectronics, Huacan Optoelectronics, and Dehao Runda continue to expand their market share through expansion and integration, and the industry concentration continues to increase. In addition, the small factory closure and the market of crystal power are eroding, and the pattern of China's LED chips has stabilized. It is estimated that by 2016, the top ten manufacturers in the LED chip market will account for 77%, and the market may become a trend in their respective alliances. Based on the top three LED chip market, the three camps of Sanan system, crystal power system and Huacan+Aoyang Shunchang+Mulinsen system have taken shape.
Most LED chip manufacturers are involved in the production of epitaxial wafers. By collecting the current MOCVD equipment of various enterprises, further official LED chip market share has a certain relationship with MOCVD possession. Moreover, in line with the industry concentration characteristics, manufacturers with expansion plans are big manufacturers. Therefore, by observing the investment situation of chip manufacturers on MOCVD equipment, it is possible to initially estimate the future production capacity trend.
Expansion plan and capacity prediction
Until the beginning of 2016, the supply and demand problem of the LED chip industry still needs to be resolved. With the 25% capacity of the crystal power system, the supply reduction of small factories and the downstream drive, the supply and demand structure is gradually adjusted. In the second half of 2016, the downstream demand drives the upstream supply. Exuberant, there was a tight situation. Chip makers' expansion plans are also followed up. For example, the second phase of the Sanan chip project is on the ground, the Australian Ocean Shunchang equipment is added, and Huacan Optoelectronics has also launched a total investment of 6 billion yuan in LED epitaxy, chips and sapphire projects. In addition, medium-sized epitaxial wafer manufacturers are also launching expansion plans. We estimate that the total shipment of MOCVD equipment in mainland China will reach 232 in 2017.
Based on an understanding of the general situation in the industry, the following assumptions are made:
1. Considering the aging of equipment, 80% of the equipment before 2015 will be converted into operating capacity;
2. In 2017, the new installed capacity will be added to the average in four quarters, that is, monthly.
3. The production capacity is converted by a 2-inch 54-chip machine.
LED packaging and testing growth rate slows down, expanding production atmosphere
The LED package encloses the LED chip of the previous step into a single finished product, protecting the chip to prevent its long-term exposure or damage, and can stabilize the performance of the chip, improve the light extraction rate and luminous efficiency, and improve the service life. Moreover, the technology and capital threshold of the packaging process is relatively low, and the market is most closely connected, which has become the fastest growing part of LED production in China.
Through the packaging methods of Lamp-LED, TOP-LED, Side-LED, SMD-LED, etc., the chip chip is formed into a granular shape after solid crystal mounting, gold wire mounting, phosphor coating, lens assembly and potting. Finished product.
Industry development and pattern
Since 2015, the price of LED packaging devices in China has dropped tremendously, exceeding 50%. The atmosphere of the industry's many years of melee needs to be resolved and officially entered the competition elimination period. The increase in penetration rate, the promotion of emerging markets, the increase in price of chips and the increase in downstream demand led to the slow recovery of the LED packaging industry in 2016, and the demand is on the rise.
Driven by obvious cost advantages, application needs and expansion of packaging manufacturers, China has already become the largest "global LED packaging device production base", and the localization rate has increased rapidly.
Since 2014, the fierce competition in the market has caused small and medium-sized factories to be forced to close or be merged. The size of the big factories is getting bigger and bigger, the signs of the group are showing up, and the concentration of the industry is increasing. At present, in addition to the traditional big plant Mu Linsen, Guoxing Optoelectronics, Hongli Optoelectronics and other LED packaging plants are also making efforts. The concentrated development of the LED packaging industry has become a trend, but unlike the upstream chip segment, the industry threshold is low, the concentration is not significant, and the reshuffle is still expected.
As of the third quarter of 2016, the average gross profit margin of major LED packaging manufacturers was 21.42%, up 0.41% year-on-year. It can be seen that the superior packaging giants have improved their profitability after the price hike in September. Especially after the chip manufacturers and package manufacturers form a cooperation system, the profit margin will be upside.
At present, in order to increase the gross profit and expand the market share, the major packaging manufacturers actively expand production on the one hand, and extend downstream or upstream on the other hand.
Expansion plan and capacity prediction
In the case of multi-domain layout, downstream market improvement and industry improvement, the packaging factory can have more financial strength to expand production. Especially after the merger, the strong and stable big companies continued to follow up on the production capacity, while the small and medium-sized factories that were blindly more annoying and put into production slowed down the production capacity after the industry shuffled. In addition, the packaging and testing links are directly linked to downstream applications, and the capacity is the most closely related to downstream demand. Therefore, paying attention to the current expansion of large factories is also a major criterion for judging supply.
In the past two years, packaging manufacturers have aimed at the expansion of lighting, automotive LEDs and display panels, and the pace is significantly faster than that of upstream chip manufacturers, prompting LED chip manufacturers to increase supply. In October last year, Guoxing Optoelectronics released another 400 million in LED packaging projects, and the production capacity was overweight. In addition, Mulinsen, Hongli Zhihui and Jufei Optoelectronics have plans to expand production.
Based on the industry's market share and the proportion of production and sales, the following assumptions are made:
1. Taking the production and sales ratio of Jufei Optoelectronics as the benchmark;
2. The unit price of each LED product is uniform.
We estimate that the LED packaging output in mainland China will reach 453 billion in 2017.
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